Daily Briefs

• Cathay Pacific Airways (293 HK) has announced plans to acquire Qatar Airways’ 9.57% stake at HK$10.8374/share, or an outlay of HK$6.96bn (~US$890mn).
• Qatar Airways acquired this stake in November 2017 at HK$13.65/share. 
• Upon approval from the SFC (mainly granting a MGO waiver), Swire Pacific (19 HK)‘s stake in Cathay increases to 47.69% (from 43.12%); and Air China’s stake to 31.78% (from 28.74%).

• With the review period complete, there are 6 non-constituents in direct inclusion zone and 4 current constituents in direct deletion zone. However, as usual, there will be discretion used.
• 4 changes result in a one-way turnover of 4%, leading to a round-trip trade of CNY 17bn (US$2.4bn). Index arb balances will increase the impact on the stocks.
• The index committee has used discretion in selecting the index adds and deletes and that could continue to be the case at this review too.

• Cathay Pacific Airways (293 HK)‘s buyback of Qatar Airways’ 9.57% stake should enhance its FY26F EPS and ROE by 4.6% and 0.36pp, respectively. 
• With passenger traffic and load factor continuing to recover, the consensus forecast of a 24.2% YoY earnings decline in 2H25 is too conservative, suggesting upside surprise. 
• Its FY25-27F ROE is a record since 2013, with potential to trade up to 1.65x P/B (30%+ upside). It is also possible to be included in the HSI again.

• Improving policy visibility on chips and geopolitics restores confidence in China’s AI infrastructure outlook.
• Explosive AI-token growth is driving sustained hyperscaler build cycles and stronger IDC order pipelines.
• GDS’s balanced China and DayOne portfolio supports double digit EBITDA CAGR; catalysts include new orders, C-REIT and DayOne IPO, implying 60-100% re-rating potential.

• New Oriental Education & Technology Group reported its first-quarter fiscal 2026 financial results, highlighting both strengths and challenges for its future trajectory.
• The company showcased a moderate 6.1% year-over-year increase in total net revenue, which indicates stable growth following a period of strategic adjustments.
• This growth is credited to enhancing capabilities, operational resilience, and a focus on sustainable profitability.

• Distinct Healthcare Holdings is a prominent private healthcare provider in China, targeting the high-end market with a network of clinics and hospitals across major cities. The company is focused on expanding its service offerings and geographic footprint, supported by strategic investors like Tencent.
• The company’s growth strategy is centered on both organic expansion through the opening of new facilities and potential acquisitions, alongside the development of an integrated online and offline healthcare service model to enhance patient engagement and operational efficiency.
• Key challenges for the company include navigating the evolving regulatory landscape of the Chinese healthcare industry, managing the high operational costs associated with premium healthcare services, and facing increasing competition from other private healthcare providers.

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• Dominant Domestic Leader Poised for Growth: NAURA is the largest semiconductor equipment manufacturer in China, uniquely positioned to benefit from the country’s strategic push for semiconductor self-sufficiency. This policy-driven demand provides a significant and sustained growth catalyst.
• Exceptional Financial Performance: The company has demonstrated a remarkable growth trajectory, with a 3-year revenue CAGR of 45.5% and a net income CAGR of 73.4%. This robust performance is fueled by strong order intake and expanding market share in key equipment segments like etching and deposition.
• Geopolitical Risks and Intense Competition Remain Key Concerns: Despite its domestic strength, NAURA faces significant risks from geopolitical tensions, particularly U.S. export controls which could limit access to key technologies and components. Furthermore, it competes against global giants with larger R&D budgets and more advanced technology portfolios.

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• In today’s Morning Views publication we comment on developments of the following high yield issuers: China Vanke
• UST yields rose 5-8 bps across the curve yesterday. This came as the market dialled back Fed rate-cut expectations following the release of strong ADP employment and ISM manufacturing data, as well as after the US Treasury Department said it may raise treasury issuances in future.
• The yield on the 2Y UST was up 5 bps at 3.63%, while the yield on the 10Y jumped 7 bps to 4.16%. Equities partially recovered from Tuesday’s slump, with the S&P 500 and Nasdaq increasing 0.4% and 0.6%, respectively.